Enhancing Internal Control Mechanisms in Local Government Organizations: A Crucial Step towards Mitigating Corruption and Ensuring Economic Development

Paraskevi Boufounou (), Nikolaos Eriotis, Theodoros Kounadeas, Panagiotis Argyropoulos and John Poulopoulos
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Paraskevi Boufounou: Department of Economics, Faculty of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sophocleous Str., 10559 Athens, Greece
Nikolaos Eriotis: Department of Business Administration, Faculty of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sophocleous Str., 10559 Athens, Greece
Theodoros Kounadeas: Department of Business Administration, Faculty of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sophocleous Str., 10559 Athens, Greece
Panagiotis Argyropoulos: Department of Business Administration, Faculty of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sophocleous Str., 10559 Athens, Greece
John Poulopoulos: Department of Economics, Faculty of Economics and Political Sciences, National and Kapodistrian University of Athens, 1 Sophocleous Str., 10559 Athens, Greece

Economies, 2024, vol. 12, issue 4, 1-21

Abstract: Corruption poses a significant challenge to economic development and governance worldwide, with its detrimental effects permeating various levels of society. In the context of Greece, where corruption has been a longstanding issue, the role of internal audit mechanisms within local government organizations (LGOs) emerges as paramount. This paper presents a comprehensive analysis of the internal control landscape within LGO revenue departments, focusing on factors influencing its effectiveness and proposing strategies for improvement. Drawing upon survey data and regression analyses, this study highlights the crucial role of robust internal control mechanisms in combating corruption and fostering economic development. The findings underscore the importance of competent personnel, legislative compliance, interdepartmental collaboration, and technology utilization in enhancing internal control practices. Despite existing legislation, gaps in internal control implementation persist, including understaffing, inadequate procedures, and limited access to information. This study emphasizes the transformative potential of effective internal audit measures in mitigating corruption at the local level, thereby contributing to broader economic growth and societal well-being. Recommendations for strengthening the internal control structures within LGOs include the formal establishment of internal audit functions, adherence to professional standards, and the promotion of information system utilization. By addressing the corruption and inefficiencies within LGOs, this research underscores the pivotal role of institutional effectiveness in promoting transparency, accountability, and sustainable economic progress.

Keywords: internal audit; public administration; financial fraud; corruption; local government (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
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